Wide-ranging changes recommended for Australian Competition Laws

In this article, Kathryn Edghill, the lead partner of our Australian Competition group reports on the results of a recent review of Australia's competition laws. Kathryn and fellow partner Graham Maher and their team of lawyers, Megan Edwards, Amy Cowper, Samantha Brown and Matthew Mulcahy, joined Bird & Bird on 1 November 2014 when Australian law firm Truman Hoyle merged with Bird & Bird, bringing our total number of offices across the globe to 27.

Why change Australia's competition laws?

Australia has a relatively mature framework of competition laws, having had laws governing dealings between competitors, in one form or another, since 1906 and culminating in the introduction of the present legislation, the Trade Practices Act (now the Competition and Consumer Act) in 1974.

Since that time there have been a number of reviews of the operation of those laws, the most recent being the Harper Review which was established by the Australian Government to conduct a "root and branch" review in 2013. The review, which is the first whole-economy review of Australian competition laws since 1993, was established in "recognition of the fact that the Australian economy has changed markedly since the last major review of competition policy".

What changes have been recommended to Australian competition laws?

In its draft report released in late September, the Harper Review put forward 52 wide-ranging recommendations for changes to Australian competition laws. A number of the recommendations flow from a recognition that competition in Australia occurs not only between firms operating in Australia but also occurs in a global context. Others are an attempt to simplify what many consider to be overly complex laws which stifle pro- competitive conduct.

The recommendations are currently open for public submissions with the final report due in March 2015. Any final recommendations will ultimately need to be passed by the Australian Parliament before they become law.

The recommendations include:

Amending the definition of ‘competition’ to ensure that it encompasses competition from imports and services supplied outside of Australia into Australia.

Removing the requirement that a contravening firm must have a connection with Australia in the nature of residence, incorporation or business presence and removing the requirement for private parties to seek ministerial consent before relying on extra territorial conduct in private competition law actions.

Streamlining the currently unused formal merger clearance process, such that those wishing to acquire shares or assets of Australian businesses would have the option of a more streamlined and accountable process than that currently offered by the informal review process.

Amending the prohibition on misuse of market power so that it prohibits conduct by corporations with a substantial degree of market power that has the effect of substantially lessening competition in a market.

Introducing a new defence to the prohibition on misuse of market power which would apply if the conduct in question would be a rational business decision by a corporation that did not have a substantial degree of market power and would be likely to have the effect of advancing the long-term interests of consumers.
Removing the prohibition on price signalling (which currently applies only to banks).

Introducing a prohibition on ‘concerted practices’ across all industries that have the purpose or likely effect of substantially lessening competition.

Amending and simplifying the prohibition on cartel conduct by ensuring that it applies to conduct affecting goods or services supplied or acquired in Australia and confining it to conduct involving actual competitors (not firms for whom competition is a mere possibility). The exemption for joint ventures would be extended to "similar forms of business collaboration" and an exemption included for trading restrictions that are imposed by one firm on another in connection with the supply or acquisition of goods or services (including IP licensing).

Removing the provision that a contravention of certain of the restrictive trade practices provisions will not be committed by reason of the imposition or giving effect to certain intellectual property rights.
Conducting an overarching review of intellectual property focusing on competition policy issues in intellectual property arising from new developments in technology and markets.

Giving the ACCC the power to grant block exemptions for conduct which would be a breach of the law but is unlikely to substantially lessen competition or is likely to result in a new public benefit.

Extending the prohibition on exclusive dealing to all forms of vertical conduct and making the prohibition on third line forcing subject to an effect on competition test.

What will this mean for those doing business in, and with Australia?

If implemented, the proposed recommendations will reshape the Australian competition law landscape and the way business is conducted in and with Australia.

Recommendations such as those affecting the merger clearance process, the ability to obtain block exemptions for certain conduct which would otherwise breach the law and the removal of the absolute prohibition on third line forcing will no doubt ease the regulatory burden for many firms. Similarly, the simplification of the laws relating to cartel conduct will be a welcome move. Other recommendations, however, such as the introduction of an effects test for misuse of market power and the removal of the protection for breach of certain restrictive trade practices by reason of the imposition or giving effect to certain intellectual property rights have significant potential to create uncertainty and disruption and to stifle legitimate competition.

It remains to be seen whether all of the recommendations will find their way into law. We will be closely monitoring and reporting on the results of the review as the process continues over the next few months. For further information on the Harper Review or other matters affecting competition in and with Australia, please contact Kathryn Edghill.